General Growth ends softer; ILFC, Blockbuster recoup some losses; Clear Channel active, better

By Stephanie N. Rotondo

Portland, Ore., Jan. 26 - The distressed debt market "seemed to have a life of its own away from the equities," a market source said Tuesday.

While the equities spent most of the day in the black, they ended the day in the red. The distressed marketplace, however, did not follow suit.

"In general, everything was up today," the source said. "There was lots of trading, that's for sure," adding that total turnover was "just shy of $2 billion."

General Growth Properties Inc.'s debt did not follow that trend, however, and ended - at best - unchanged and at worst, a little softer. The company announced early in the day that it was seeking to add UBS Investment Bank Inc. as its financial advisor.

International Lease Finance Corp. meantime regained some of the losses it had incurred in Monday's session following a rating downgrade. The downgrade was blamed on concerns that parent company American International group inc. would not be able to sell the unit and, according to a news report Tuesday, AIG has abandoned the attempt altogether.

Elsewhere, the overall positive tone of the day might have contributed to gains in Blockbuster Inc.'s bonds. Tuesday's session marked the first day in nearly a week that the movie rental chain's notes were not declining. But the rest of the retail sector did not fare as well.

Clear Channel Communications Inc. paper continued to be among the more active issues - away from banks and other financials, which one trader said were the dominators of the day - and better. Still, there was no news to explain why the credit has been slowly but steadily moving higher recently.

General Growth ends softer

General Growth Properties' bonds ended unchanged to somewhat weaker, market sources reported.

One trader saw the 8% notes that were to have matured last year around 104, which he called "kind of unchanged." He also saw the 7.20% notes due 2012 at 103 bid, 103½ offered, also unchanged.

Another source called the 8% notes "a little bit softer, but kind of right where it has been" at "104 and change," versus levels with a 105 handle on Monday.

"The equity got the crap kicked out of it," the second source added. The Chicago-based mall operator's stock (Pink Sheets: GGWPQ) closed 34 cents lower, or 3.32%, to $9.90.

On Tuesday, General Growth announced that it had engaged UBS Investment Bank Inc. to evaluate "potential financial transactions for emergence from Chapter 11, raising exit capital and with such other matters as may be required by the board of directors." A hearing to approve the hiring of UBS is scheduled for Feb. 16.

"The engagement of UBS complements the services provided to us by Miller Buckfire," said Adam Metz, chief executive officer of GGP, in a press release. "With both advisors, we are positioned to analyze and source the most cost effective primary capital that we will need to complete the reorganization process, a goal intended to benefit all of our stakeholders."

The news of the new financial advisor came one day after the company had announced it had completed a $9.4 billion restructuring of mortgage notes.

ILFC debt regains ground

International Lease Finance's bonds were higher, according to a trader, bouncing back after having fallen multiple points on Monday after having been downgraded by Standard & Poor's, its ratings cut two notches to BBB- from BBB+ as the agency questioned whether the aircraft lease finance arm of troubled insurance giant American International Group Inc. will be sold any time soon. The Financial Times reported Tuesday that AIG has abandoned its efforts to sell the unit after concluding the relatively small potential profit wouldn't justify such an asset sale.

He saw the 4¾% notes due 2012 quoted "right around 87," which he called a couple of points higher versus Monday's levels and said ILFC's 6 3/8% notes due 2013 were up by 3 points, around 86. He said the $1 billion issue "is a good indicator" because of its liquidity, and said that there had been "good-sized trading" in it.

He noted that the ILFC bonds had fallen on Monday, but "made their way back up today," adding that while some issues were perhaps a point below where they had been before the initial retreat on Monday on the downgrade news, "they're almost back to where they were."

A market source at another shop said that the 6 3/8s finished at 841/2, up 1½ points, on brisk trading, while ILFC's 5.30% notes due 2012 gained about 3 5/8 points, to end at 86 5/8 bid, and its 5.40% paper, also due 2012, had firmed more than 2 points, to 88 bid.

Yet another trader said that ILFC bonds "rallied some," a trader said, after the bonds had lost as much as 3 points in the previous session. The trader quoted the 6 3/8% notes due 2013 at 85 bid, 86 offered, compared with opening levels of 821/2.

Blockbuster bonds recoup losses

After losing ground for nearly a week, Blockbuster paper reversed its course.

A trader said the 9% notes due 2012 "rebounded some" to end around 25. Another market source said about $25 million of the debt traded, ending "up and down" around 25. The source also saw the 11¾% notes due 2014 at 69½ bid, 71 offered, also on $25 million traded.

The improvement in the credit - which lost over half its value since last week - came as the Conference Board put out its consumer confidence report for January. The report showed the index moving up to 55.9, compared with 53.6 in December.

But the report itself was likely not the cause of Blockbuster's rebound, especially as several other retailers ended the day weaker.

A trader said Bon-Ton Stores Inc.'s 10¼% notes due 2014 fell about a point to around 92, while Claire's Stores Inc.'s 9 5/8% notes due 2015 dipped to around 80. Neiman Marcus Group Inc.'s 10 3/8% notes due 2015 were also softer around 99.

Clear Channel active, better

Clear Channel Communications' notes were "definitely active again," in the words of one trader.

The trader said the 10¾% notes due 2016 spent most of the day around 71 bid, 72 offered, but added that there were some trades at 73 late in the day. He also saw the 11% notes due 2016 around 61 early on in the session, though those also traded up by the end of business.

At another desk, a source said over $25 million of the 10¾% notes turned over with a 73 handle.

"So they are definitely up on the day," he said.

Other than several blogs talking about the San Antonio-based media company's potential re-wooing of shock jock Howard Stern, there was no news out that might explain the activity or price movement.

NewPage steady, Catalyst slips

A trader saw NewPage Corp.'s 10% notes due 2012 ending around 60 bid, 61 offered, essentially unchanged from Monday, but on "good volume." Its 11 3/8% senior secured notes due 2014 were at 96 bid, 97 offered, also around Monday's levels.

He further saw the Miamisburg, Ohio-based coated paper company's 12% senior subordinated notes due 2013 holding around a 41 bid level, so the NewPage bonds "sounded about the same today, but on decent volume," especially for the 10% notes.

In that same coated paper sector, a trader saw Catalyst Paper Corp.'s 8 5/8% notes due 2011 - which had jumped about 6 or 7 points, into the high -0s on Monday, on news that the Richmond, B.C. manufacturer had sweetened its previously announced exchange offer for those bonds - were ending down a point, at 86 bid. "But there was some trading," he cautiously acknowledged.

A market source at another desk also saw the Catalyst bonds retreat by a point to the 86 area.

Broad market firmer

Elsewhere in the wide world of distressed, First Data Corp.'s 9 5/8% notes due 2015 were "up a bit" at 89 bid, 90 offered, a source said. He added that a "big, big hunk" of the issue had traded.

Another market player saw the 9 5/8% notes "back up" to around 90, versus levels around 88 on Monday.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 were also better, ending half a point firmer at 271/2.

Paul Deckelman contributed to this article.

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